The first hearing date is scheduled for May 17, after Ever Credit Ltd filed its petition dated Tuesday.
Country Garden, whose liquidity crisis shook the nation’s financial markets in recent months, failed to make payments on a term loan facility of about HK$1.6 billion (US$204 million), plus accrued interest, according to an exchange filing.
The announcement came after the Guangdong-based developer defaulted on a dollar bond in October, overtaking rival China Evergrande Group as the epicentre of the property crisis.
Country Garden is still seeking to avoid liquidation and pull off a debt restructuring, which promises to be one of the biggest such exercises in the world’s second-largest economy.
Country Garden’s setback adds to China’s property turmoil that’s weighing on the economy. The property market and related industries at its peak accounted for about 20% of China’s gross domestic product.
Helmed by one of China’s richest women Yang Huiyan, Country Garden has about US$10 billion of offshore bonds outstanding, according to data compiled by Bloomberg.
Once the nation’s largest developer by sales, the company employed 130,000 people, housed tens of thousands of families and accumulated US$240 billion in liabilities.
Country Garden’s dollar bonds trade at deeply distressed levels of around 8 cents on the dollar, showing how little money investors expect to recover, after some were near 80 cents in June. Its shares fell 4.2% at the open Wednesday bringing the loss in the past 12 months to 71.3%.
Country Garden’s winding-up petition “is likely a necessary process for the petitioner,” said Zhi Wei Feng, a senior analyst at Loomis Sayles Investments Asia Pte. “To other creditors, it is good to see some push factor.”
Ever Credit is a unit of Kingboard Holdings Ltd, which in October issued a so-called statutory demand to Country Garden for repayment.
Country Garden said its debt that involves Kingboard accounts for a very low proportion of the offshore liabilities. The “radical actions” of a single creditor will not have a significant impact on the company’s delivery of homes, normal operations and the overall restructuring of overseas debt, it said in response to Bloomberg’s queries.
Country Garden hired KPMG Advisory (China) Ltd as the principal financial adviser for the company’s offshore liability restructuring in January.
An ad-hoc creditor group named PJT Partners Inc as financial adviser and Kirkland & Ellis LLP as legal adviser, Bloomberg reported last month.
Country Garden could extend its debt by as long as nine years if it were to pull off a debt overhaul, Bloomberg Intelligence analysts Daniel Fan and Hui Yen Tay said in a recent note.
This is based on estimates that its earnings before tax reaches about 12 to 13 billion yuan, and that it swaps 40% of offshore debt into equity, they wrote.
In recent months, the company has taken steps to ease its debt woes, including repaying an 800 million yuan (US$111 million) local bond in full and selling a stake in a mall operator for 3.07 billion yuan with proceeds to be used for offshore debt restructuring.